Tesla Reports Larger Than Expected Profit For Q3 2016 Earnings

OCT 26 2016 BY JAY COLE 78

Tesla's third quarter was the first to show volume deliveries of two models - Model S and Model X

Tesla’s third quarter was the first to show volume deliveries of two models – Model S and Model X

Every quarter we diligently report on the quarter that was for Tesla Motors, and usually the story goes ‘total sales are going up, total profit (or rather the lack thereof) going down’.

However this quarter was a little different.

Elon Musk tipped off Q3 earnings "surprise" to investors earlier this Summer, which made the results today...not a surprise

Elon Musk tipped off Q3 earnings “surprise” to investors earlier this Summer, which made the results today…not a surprise

With a pre-announcement of record sales in early October, we knew that much higher year-over-year revenue was already baked into this report.

But thanks to an odd email from Tesla CEO Elon Musk to company workers on August 29th (read here) urging them to help assist the company to  “show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production”, we knew that at least on paper this would be Tesla’s most successful quarter to date heading into the report.

To that end, Tesla did not disappoint, posting a $21.9 million profit (GAAP no less) or 14 cents per share.  Non-GAAP EPS was a fairly amazing 71 cents per share/$111 million, that was versus estimates for a 55 cent loss.

There was an expectation for only an adjusted earnings of a penny or two,  so Q3 was a thorough beat over the street (we could not find one analyst who overshot) , and as one might expect TSLA traded up immediately on the news (about 5% at time of press) – real time quote can be found here.

On the revenue side, Tesla report $2.3 billion (GAAP), pretty much exactly as expected, but still up 145% over a year ago.

Now before we get too excited, we really have to note that Tesla seemingly stored up some serious ZEV credits to sell in Q3 to make this happen – $138.5 million worth (much high than any other result of late – and eating up the demand for any credits in Q4 as the company expects them to be “negligible”).

So if one is looking for a dark cloud in the report, that is probably it.  On the other side of the coin:  selling ZEV credits is a legitimate part of Tesla’s business plan…and they have been doing it for years (and will continue to do so).

Tesla had a gross margin of 25% in Q3 (before credits), well ahead of analysts expectations of 22%

Tesla had a gross margin of 25% in Q3 (before credits), well ahead of analysts expectations of 22%

On the flip side, it was also expected that Q3 would be a “one and done” profit quarter, and Tesla has said ‘not so’, the profitability will (hopefully) continue – although it is difficult to see how without more ZEV credit revenue recognition in Q4.

So there is a little something in there for both the Bull and Bear positions.

Per Tesla:

“The Tesla third quarter results reflect strong company-wide execution in many areas. Furthermore, we expect this to continue into Q4 and project positive GAAP net income (excluding non-cash stock-based compensation) despite ZEV credit sales in Q4 likely being negligible.

We set new records for vehicle production, deliveries and revenue, which led to GAAP profitability and positive free cash flow (cash flows from operations less capital expenditures). At the same time, GAAP total automotive gross margin and gross profit per car increased substantially.”

Update From the conference call:  CEO Musk says Q3 was the best ever and that Q4 will be “great as well”, while re-iterating feelings that Q4 will be profitable even including non cash stock based expenses.   Musk also isn’t a big fan of ZEV revenue questions on call, saying it is “wholly misunderstood”, and revenue timing is at the whim of the market – noting that some quarters there is no market at all for them, and at other times they get 50 cents on the dollar – whatever that means.

The driver of profitability for Q3 (and into the future) certainly came via gross margins, as Tesla well outperformed the market’s expectation of around 22%, by coming in at 25% (and that is before any fancy ‘credit math’ – added in, automotive gross margin would have been 29.4%).

Tesla’s cash and cash equivalents ended Q3 at $3.1 billion at quarter end, down from $3.2 billion at the end of Q2, but we should note that during the quarter Tesla paid down ~$600 million in debts:  $127 million on its borrowing facilities, and settled $422 million worth of conversions on its 2018 convertible notes.

As a result, it appears Tesla will not need to further access the market for capital in 2016 as CEO Musk had earlier stated.

From conference call: CFO Jason Wheeler says GAAP revenue growing faster now than than GAAP operating expenses, which is how the company demonstrated a profit in Q3, and will do so in the future.

From conference call: CEO Elon Musk furthers adds to note on raising new capital, saying things are looking good at the moment, and it likely will also not be needed in Q1 (although he won’t go on record saying that ‘for sure’).  

Musk stresses often Tesla now does not need to raise capital (even for the Model 3), but they also don’t want to cut it too close either, so more capital would be in order to create a pad, or “de-risk” the business moving forward to allow for any unexpected events.  Our takeaway on this is statement is; if the money is there for the taking, Tesla is going to go ahead and get some at some point next year, for the greater benefit/future-proofing of the business.

Actual Tesla deliveries in Q3 even higher than earlier company estimates

Actual Tesla deliveries in Q3 even higher than earlier company estimates

Tesla vehicle sales and guidance:

As for the actual sales in the quarter, Tesla adjusted earlier estimated guidance of ~24,500 Model S and Model X vehicles deliveries up by as much as it ever had in the past.  The Q3 finally delivery tally stands at 24,821, while production stood at 25,185 vehicles (up 92%).

Tesla's Fremont factory produced more than 25,000 vehicles for the first time in Q3

Tesla’s Fremont factory produced more than 25,000 vehicles for the first time in Q3

Current tally of Tesla sales in 2016:

Q1: 14,810
Q2: 14,402
Q3: 24,821

Total:  54,033

Of the Q3 numbers specifically – sales of the Model S finished at 16,047 units (vs 15,800 earlier guidance), while the Model X stood at 8,774 (vs 8,700).

Tesla once against re-confirmed its forecast for 50,000 new deliveries for the second half of 2016, with a fourth-quarter estimate of just over 25,000 deliveries…which would basically allow the company to hit the lower end of its full year delivery guidance of 80,000 vehicles sold.

With the addition of a new 60 kWh trim level for the Model S, the average transaction price on the car decreased during Q3 by 6.5%.  Tesla noted that if new production of the new 100 kWh (and much pricier) trim level Model S sedans had not started so late in Q3 that the new top-of-the-line model would have “otherwise have balanced that out.”

Update from conference call:  Musk says that orders/demand for the new 100 kWh options is high (without being specific), is heading there now after the Q&A

Tesla did note that 2% of the decline came via “price adjustments that were made for inventory cars that already had mileage on them, showroom cars with wear, and cars that were built before product transitions, such as those with the original fascia.”

As for the Model X pricing, it was mostly flat, but down 1.2% sequentially because earlier Q2 comps included the original/premium Signature Model X build out.

Update from conference call:  Tesla CEO Elon Musk got well in front of any discussion of a new policy of discounting at Tesla, says that notion is “absolutely false” while pointing to profitability increases per vehicle during Q3.  Adds that overall there was very few discounts, but even at that they were shutdown down completely when discovered.

Tesla Store/Service Center In Dubline

Tesla Store/Service Center In Dublin, California

On Demand & Infrastructure:

Without getting into specific numbers (as the company is not want to do), Tesla said new orders grew by 68% over a year ago, while the total store count grew to 250 locations around the world by adding 17 new boutiques in the third quarter

“In Q3, combined net orders for new Model S and Model X vehicles grew 68%, compared with the same period last year.”

As for the headcount on Supercharger locations, that now stands at 715; while the individual Supercharging, uh…charge points now total 4,461.  The total number of destination charger locations reached 3,222 spots, with 5,547 connection points.

Tesla put its charging network into some easier to understand context:

“97% of the population in the continental U.S. and 86% of western Europeans are now within 150 miles of a Supercharger. High population areas in China, Japan and Australia will soon reach similar coverage levels.”

Supercharger location count expanded to 715 locations worldwide by the end of Q3 2016

Supercharger location count expanded to 715 locations worldwide by the end of Q3 2016

Market Share:

Tesla Model S Q3 sales in US

Tesla Model S Q3 sales in US (click to enlarge)

Tesla continues to have a love affair with comparing the Model S with the “large luxury” sedan category in the US (which actually isn’t a vehicle class at all), saying that all-electric S has a 32% share of the top 12 on the list thanks to the car’s 60% year-over-year sales gain in the US.

As for the Model X, Tesla has some more numbers for us:

“Despite still ramping production, Model X is also gaining market share, already growing to 6% of the U.S. large luxury SUV market in Q3, or #8 in the large luxury SUV category, edging out the Porsche Macan and Cayenne, the Land Rover R-R Sport and the Infiniti QX80. The large luxury SUV category is three times the size of the large luxury sedan category in the U.S., and represents a huge opportunity to further increase Model X sales.”

Tesla Model 3 continues to be the main investor focus going forward for the company

Tesla Model 3 continues to be the main investor focus going forward for the company

Tesla Model 3 and Gigafactory Progress

Like we have seen for the past few quarters, Tesla continues to guide Model 3 start of production (and volume production at that) to the latter part of next year.

“Gigafactory construction and Model 3 development both remain on plan to support volume Model 3 production and deliveries in the second half of 2017.

For Model 3, we have completed production line layouts and will soon begin installation of new body welding and final assembly lines. We have established a world class team of suppliers for Model 3 production equipment and components and critical long lead time equipment and components have been sourced.”

Tesla Gigafactory construction/cell production still on track according to the company

Tesla Gigafactory construction/cell production still on track according to the company

Tesla also noted they are currently product testing the chassis and the high voltage drive systems on the Model 3, as well low voltage subsytems (HVAC, infotainment, lighting, etc). 

“As refinement of the Model 3 continues, we remain on plan for our timing, volume, vehicle capability, pricing,and margin targets.”

Update from conference call:  Elon Musk is asked about change in reservation totals for Model 3 (stated at 373,000 about a month after order system open”not something we comment on”.ed).  The CEO declines to answer saying that the current number is “not something we comment on”.

Specific to the Gigafactory tool-up, Tesla says everything is A-OK there too:

“The Gigafactory remains on track to begin cell production later this year for use initially in our energy storage products and later to support volume production and deliveries of Model 3 in the second half of 2017. In addition, we continue to expand production capacity at our Fremont facility and are exploring additional production capacity in Asia and Europe.”

Tesla Energy Powerpacks all wrapped up and ready to go at the company's Gigafactoy in Nevada

Tesla Energy Powerpacks all wrapped up and ready to go at the company’s Gigafactoy in Nevada

Tesla Energy

While Tesla Energy is a part of Tesla Motors, we have to admit our interest is still pretty low at this early stage of the game. Nonetheless, Tesla still mentions its advancement (in the most generic way) for Q3… despite our feelings of malaise:

“Tesla’s energy storage business also continues to grow. Tesla is installing a 20 MW/80 MWh Powerpack system at the Southern California Edison Mira Loma substation to help reduce rolling blackouts. Upon completion, this system will be the largest lithium ion battery storage project in the world and will hold enough energy to power more than 2,500 households for a day or charge 1,000 Tesla vehicles.”

Update from Conference call: Musk says that the solar roof “looks better” than a normal roof, exceeding his own expectations, and that the product is aimed specifically at new home builds and homes in need of roof replacement.

Tesla (and partner Panasonic) to debut its "Solar Roof" later this week

Tesla (and partner Panasonic) to debut its “Solar Roof” later this week

SolarCity Acquisition

Tesla kept the focus on the good news for the quarter and the potential good news ahead with its pending acquisition of SolarCity (if all goes to CEO Musk’s plan anyway).

“With the previously announced plan to acquire SolarCity, we look forward to making solar as compelling as electric vehicles. Acquiring SolarCity would leverage Tesla’s existing investments in the Gigafactory and the next-generation Powerwall and Powerpack to drive revenue growth.

In addition to the revenue growth associated with making solar more compelling, the combined company is expected to achieve over $150 million of direct cost synergies in the first full year post-close. Over the coming days,there will be a number of additional events relating to the SolarCity acquisition and our strategic plan for the combined company.”

Tesla Solar Roof Event Details

Tesla Solar Roof Event Details

Here are those upcoming events:

October 28th: Product demonstration event to unveil an integrated solar roof with next-generation energy storage and EV charging.  (we will have livestream of the event from Universal Studios in California as it happens)

November 1st: Additional information to be released about the combined company.

November 17th: Stockholder meeting to tally the final vote on the acquisition.

Tesla Model X - Finding a spot and parking itself at Tesla HQ in Palo Alto, California

Tesla Model X – Finding a spot and parking itself at Tesla HQ in Palo Alto, California

Just to wrap things up, we should probably be mentioning something about Tesla’s most recent announcement that all new Tesla vehicles in production today (and the Model 3 in the future) include enhanced hardware that will someday lead to fully self-driving/Level 5 autonomy (~2018ish).

But we are not, because nothing new was shared, and one can read about it all (and watch a demo) here.

Instead, we just have to highlight from the conference call that Mr. Musk chose to put the Tesla-Mobileye spat back into focus (pun intended), but saying that MobilEye was “issuing – bullshit” over autonomous driving systems (radar vs camera/operational abilities) after the two split up.

Musk stated, “I would separate what Tesla says from say (what) some supplier of ours is issuing – bullshit.  The blog that I wrote was very clear that radar is moving from a supplemental to also a primary sensor.  It’s not to the exclusion of vision, but it is also a primary sensor…we feel highly confident that the 8-camera solution with 12 ultrasonics and a Ford radar, and the computing power that we now have onboard is capable of full autonomy…There are obviously skeptics out there. Well, I suggest that they do not bet against us.”

We now look forward to more entertainment on this subject in the future between Tesla and the #1 autonomous driving chip supplier.


And if you want to know more about what is happening with Tesla’s financials or more commentary/reaction to the company’s Q3 earnings and conference call than we provided here…well, go watch CNBC, or read a business report or something;  we are a site dedicated to the adoption of plug-in vehicles and their infrastructure for Pete’s sake.

Tesla’s full shareholder Q3 letter can be found here if interested.

 

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78 Comments on "Tesla Reports Larger Than Expected Profit For Q3 2016 Earnings"

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Musk for the Win!

Hey Sven… 😀

Guess what? The stock went up.

If Tesla can turn a profit for the quarter, it makes you wonder what else is possible. Perhaps Trump defeating Hillary on election day isn’t as far fetched as most news polls and political pundits would have use believe. . . cough, cough, Brexit, cough, cough. 😉

It’s about time!

Now they can actually reinvest the profits back into the company. Tesla should be targeting break even going forward. It appears they need to shore up their service centers quickly, so it’s too early for big profits.

They could target both profit and break even if they wanted to. But the smart move is to take as big loss as they can handle while expanding as fast as they can.

Growth is the most important thing right now.

+1

Most definitely. Scale across the board and additional models can’t come soon enough.

Wall Street will no longer fund big losses.

Smart move is to have several quarters of small profits and when Wall Street is again in the mood to hand over $2.5B Plus take it,double down, and hit the pedal to the metal again.

There will be no problem for Tesla to get the funds to start and ramp up the Model 3 production. There is no need to wait, rather the opposite it is important to keep the momentum going.

Rob Stark said:

“Wall Street will no longer fund big losses.”

If by that you mean that Tesla will have a hard time borrowing money to fund the Model ≡ ramp up, then I’m pretty sure you’re wrong. That’s not at all a “loss”; it’s an investment in future growth.

Investors are pretty excited about the M≡, and the unprecedented ~400,000 reservations, which is significantly higher than what nearly everyone was expecting.

Perhaps you’ve read about Wall Street expressing displeasure at the Tesla Motors/SolarCity merger. Wall Street sees that as a bad investment, and they may well be right. But that doesn’t at all mean the Model ≡ is a bad investment.

Between all those paid reservations and Tesla Motors demonstrating that it can make a net profit in a quarter when it tries, I’m confident that investors will be lining up to throw huge wodges of cash at Tesla Motors over the next 2-4 years, as Tesla builds out production for the Model ≡.

Q1 2016:
Total deliveries: 14,810 vehicles
Tesla Model S: ?
Tesla Model X: ?

Q2 2016:
Total deliveries: 14,402 vehicles
Tesla Model S: 9,764
Tesla Model X: 4,638

Q3 2016:
Total deliveries: 24,821 vehicles
Tesla Model S: 16,047
Tesla Model X: 8,774

What are the exact numbers for the Tesla Model S and the Tesla Model X in Q1 2016?

12,851 Model S
2,659 Model X

Q1 2016:
Total deliveries: 14,810 vehicles

Your numbers added together are higher in total than the actual Q1 2016 total of 14,810.

Sorry, it was production. This is the only thing I can find about deliveries. http://ir.tesla.com/releasedetail.cfm?releaseid=963460

22 million profit and 139 million ZEV credits.

If the zero EV credits go away next quarter then I don’t see how they can make a profit next quarter.

What am I missing?

Nothing.
They pushed hard to show a Q3 profit in order to help with this quarters effort to secure capital to be able to build the assembly lines for the M3

@Gary
Tesla says they can do it. Where’s the extra revenue coming from?

article quote:
Per Tesla:

“The Tesla third quarter results reflect strong company-wide execution in many areas. Furthermore, we expect this to continue into Q4 and project positive GAAP net income (excluding non-cash stock-based compensation) despite ZEV credit sales in Q4 likely being negligible.

Model X is still ramping up to take full advantage of the massive investments that were made over the last year and half to enable relatively high volume production and sales.

As Musk mentions, the large luxury SUV market is much bigger than for sedans. Model X has a lot of room to grow there, and if Tesla irons out the door problems then Model X could become the top seller in the segment, IMO. Dollar bills y’all!

Probably offset by higher margin on the cars with the 100 battery packs and new self driving software upgrade options.

@Dan
They need another 100 million in revenue. Can they get that just with higher margins?

4000.- more per car looks doable.

and maybe additional revenue from the big Ca utility battery storage project!

Model X sales are still ramping up.

I think so, yes. The market for the Model S and Model X seems to be fairly immune to price increases of 10% or less.

The Model ≡ will be a very different story. Tesla can’t raise the price there by 10% without having a significant impact on sales. In fact, a 10% price hike might send the cost/benefit into a death spiral, due to lower volume of sales causing an increase in per-unit costs, forcing another price hike, causing even lower sales…

Tesla paid down $600M in debt. If they don’t do that in Q4 and sell no EV credits they will still make over $500M in profit.

It’s good Tesla is paying down some large volumes of debut. In my option that is good they are factoring in paying down the debut then out right profits.

Letting debut pile up and not addressing it is the main thing that kills a railroad or canal or a large construction project like the giga factory.

If Tesla is activity paying debut then it shows to the creditors that Tesla is a good company for someone to let Tesla borrow money.

Convertible Bond holders gave notice,as is their right, they wanted their money NOW.

It was not Tesla’s choice.

Acevolt – paying down debt (or not) has no effect on profit.

On top of no convertible note repayments and increased gross margins there is revenue from Battery Energy Storage.

BES profits will more than make up for ZEV sales.

Model S and X P100D.

Elon Musk said P100D has very large margin and order for those cars are very high. He is monitoring the production of 100 kWh pack daily.

Only 2% of Tesla’s were returned in the buy back program. To me that speaks of customer support and brand loyalty far beyond what is normal. In addition it says something about the superiority of the ev over other modes of personal vehicular transportation.
Once you go Tesla, you never go back.

So far I have not seen a used Telsa Model S drop below $42,000 dollars used and this is for a 40 kilowatt 2012 version.

Yeah, really. Coincidentally around the same average projected price of the M3.

Congrats Tesla!

Well done, Tesla! Now time will tell how much of this is due to creative accounting. I guess we’ll see the next quarter or two.

You can notice some of it right now if you look at report more carefully.

Nah, I can’t be bothered, really. However if I was an investor, or a potential investor I would be looking very carefully at the report now that it is known that Tesla/Musk went in to the quarter to make a one-time surprise profit. That screams of creative accounting to me, moving income and costs around to make it seem a lot better than it really is. It’s quite hard to do that for several quarters in a row though, eventually people want to get paid. Of course, the next quarter’s loss is going to be blamed on the model 3. How convenient…

Any evidence? Oh, just blowing smoke!?

Evidence to what?

A pleasant surprise. Good work by Tesla.

A bad day for Sven I guess is crying like a baby.

…unless he did the smart thing, and exited his short TSLA position before the news was announced.

But then, sven’s posts on the subject of Tesla bring into serious question his ability to view Tesla-related issues rationally, so…

It’s a good thing that the expense Tesla incurred in the 3rd Quarter for their paid shills like yourself didn’t put Tesla in the red. Either Elon delayed paying your guys until the 4th quarter or you shills work for minimum wage. 😀

Nice work, Jay, Much appreciated.

good day for the FUDiots, don’t be shy, pile on!

All Hail The Conquering Hero

The only “minor” problem that “accounts payable” (unpaid invoices) exploded by $628 million higher up to $2.3 billion.

But don’t worry, new share dilution will cover this and some more. The music is still playing.

Expenses, including unpaid invoices, general track in proportion with sales. So, it’s only potentially a problem if they rise at higher rate. Even then, there can be timing nuances at play that aren’t necessarily a negative. But keep looking, I’m sure you can find “real” negatives if your diligent enough.

The subtle implication that it is a game of musical chairs. But it could be it is Musk who calling the tune, the pied piper who musk be followed?
https://www.youtube.com/watch?v=IYODJsg8_dA

Great news. This will silence the critics. As they ramp up the production and sales, they should be able to make at least small profits.

2016-Q3 proved to be a great quarter for Tesla with 24,000 + deliveries. Many of their own records were broken and in 2016-09, more than 1,100 Model-S is sold in China.

Jay,

Has Tesla commented yet on what their future Model S/X battery cost expectations are once Gigafactory comes online. They often mention Model 3 and battery storage as Gigafactory goals but I’ve never seen mention of S or X. Seems silly not to point out how significantly margins will improve if they do intend to produce the cells and packs for S/X at the gigafactory.

Company tends to not disclose their lower production cost while keeping their products at current prices.

They talk about improving gross margins all the time. Same thing, just from the other side of the equation.

If history is any guide, Tesla engineers a profitable quarter before the next big capital raise. Elon may claim they will not be raising capital “for the Model 3” but, mark my words, they will raise capital using one excuse or another: probably to “support” SolarCity’s loser business model (“your small scale solar will be cheaper than the grid’s large scale solar/wind”). It doesn’t matter what it’s for: it all goes into the same place.

It’s true. Musk explicitly left the option to raise more money on the table, to put money in the bank against unforeseen circumstances, to lower financial risk to the company.

It’s a smart thing to do, especially if the market will buy bonds with a low interest rate.

Any word on when the Model 3 reveal part ~2.5 would happen?

This is indeed a great quarter that will leave the trolls searching high and low for any reason at all to intentionally blind themselves to this great news. Nothing can help that.

But everybody needs to be aware that Model 3 spending will INTENTIONALLY make this a single quarter victory, which will not be repeated until 2018.

Here is how Musk explained it to his employees in what was supposed to be an internal-only email:

“Once we get to Q4, Model 3 capital expenditures force us into a negative position until Model 3 reaches full production. That won’t be until late next year.”

So I’m starting the prebuttal early for Q4 2016, and Q1-4 2017 losses. Tesla isn’t going to be profitable, and it won’t be because Tesla is a failure, or because Tesla used tricks to make this quarter profitable. It will be because Tesla is investing heavily into their own success.

Thanks for your observations, Nix. You sum up my own thoughts on the matter.

It’s puzzling to see Tesla claim “…we expect this to continue into Q4 and project positive GAAP net income… despite ZEV credit sales in Q4 likely being negligible.”

As you point out, there are other very strong indications this won’t happen; that Tesla won’t have another cash flow positive quarter for some time. I seriously doubt that will happen again in the next couple of years, at least.

It’s hard to be cash flow positive while you’re borrowing massive amounts of money to quickly ramp up automobile production!

it looks like you are mixing “cash flow” and “income”, which are two separate things. the “positive GAAP net income” assertion seems kind of shaky, it’s not like they are expecting a massive increase in deliveries for q4. two possibilities are that they either had an extraordinary expense in q3 that they don’t expect to see in q4, or the “net income” is not *bottom line* net income. i doubt that tesla would make a statement about q4 that they *know* to be false…too many legal ramifications in doing that kind of stuff.

as to being “cash flow positive”; borrowing *is* cash flow positive – it’s when you *use* the borrowed money that you get negative cash hits.

+1 Capex will go up, taking cash flow negative, but not stopping profitability on operations (higher 100kwh and Model X sales).

I sent a note to Jay at Q3 end, that I’ll crow about now. The ~25% margin number didn’t surprise me, after witnessing sales where “discounting” was claimed, but ultimately “60” buyers were paying more cash-flow for higher optioned cars, whose costs were sunk (75kwh battery, AP, etc.).

The ground was fertile, for a positive earnings surprise. How analysts kept lower estimates after “24,500” sales were announced, i have no idea. I’m just enjoying a round trip in the stock, this week 😉

“no comment” said;

“…as to being ‘cash flow positive’; borrowing *is* cash flow positive – it’s when you *use* the borrowed money that you get negative cash hits.”

Thanks for the correction, “no comment”. As I’ve said in the past, I’m not a “financial guy”. Mea culpa for using the wrong term(s).

No doubt accountants have some term for “profit or loss, ignoring money borrowed for capital investment”, but I don’t know what that term is. It irks me that people keep saying Tesla is “not profitable”, even though they do make a profit on making and selling cars.

No Comment – I’m a little surprised also, but they said “GAAP profit excluding stock based compensation” (which makes it non-GAAP, duh). Anyway, non-GAAP profit on that basis was 111m this quarter. Losing the 139m of ZEV credits would take that down to a 28m loss, but there are enough other moving parts plus delivering 500 extra units to bring it back to breakeven.

“….borrowing *is* cash flow positive”

Not using common terminology. Cash flow positive almost always refers to operating cash flow (OCF) or free cash flow (FCF). Both exclude borrowing and other financing cash flows.

sources of cash in a funds flow statement includes more than just cash from operations. when you look at a funds flow statement, cash infusions from loans are also counted. it is true that cash from operations is a separate line item, but it isn’t the *only* item.

Has the 150,000th Tesla Model S delivery taken place in Q3 2016, or will it take place in Q4 2016?

There is talk of CARB capping how many ZEV credits any 1 manufacturer can sell during a single year. Obviously, Tesla is against any such cap.

You forgot the “r” in crap. 😀

“Additionally, a large part of operating cash flow was achieved by the company not paying its bills. If we look at the balance sheet, accrued liabilities and accounts payable rose by more than $628 million in the period! That’s nearly 1.5 times the quarter’s operating cash flow, and more than 3.5 times free cash flow for Q3. While the headline looks good, it was mainly due to good accounting. Had Tesla paid its bills, cash flow would have likely been negative, and perhaps by several hundred million dollars if accounts payable and accrued liabilities had been flat sequentially.”

The analysis you quoted is incorrect, and this subject was already discussed upstream in this very comment thread.

See:

http://insideevs.com/tesla-reports-larger-than-expected-profit-for-q3-2016-earnings/#comment-1081269

…and Jay Cole’s reply to that comment.

“Not paying their bills” is a mischaracterization because it is perfectly normal for AP to grow alongside revenue. That said, he’s 100% correct that the increase in Accounts Payable was the major contributor to operating cash flow in Q3.

Tesla better triple electric car production in that OPEC is going to cut oil production by 4% http://oilprice.com/Energy/Crude-Oil/Saudis-Gulf-OPEC-Members-Offer-To-Cut-4-Of-Oil-Output.html

If Tesla could start putting 250,000 cars on the global highways every year it would offset this oil cut.

Look, I’m thrilled that they are doing well. I really am. I have two model 3’s on order and I wish them nothing but success, but I feel like their stock is incredibly overweight right now, even as a growth stock. They made $22M in Q3 and their stock peaked by 7% that day. They have a negative 22.3 P/E ratio and have only made a profit twice. Compared to something like Apple with a positive 13 P/E ratio, and an earnings call in which they made $9B in one quarter and their stock drops by 4%. Based on market cap, Tesla would have had to make $440M to be comparable to Apple’s earnings this quarter, and Apple’s P/E doesn’t even take into account their $240B of cash, which would bring it down to a P/E of 8 if that was taken into account. Like I said, I don’t think Tesla is going anywhere and I think they are an amazing company, but they do have their work cut out for them and are by no means the guaranteed victor in the EV space. Their stock is scarily pricey!

Tesla Motors Earnings AlphaGraph: Q3 2016 Highlights. https://alphastreet.com/b5f9c746